The FTSE 100 has tumbled more than 2% as inflation fears grip markets in a widespread sell-off in European stocks despite a French vote against far-right politics, while commodity stocks suffer from falling demand as China enforces new lockdowns.

The blue-chip index shed 171 points, or 2.3%, to trade at 7,351 – its lowest level in a month – following both French and German markets sharply lower despite Emmanuel Macron being voted in for another presidential term as the French people said no to the far-right politics of Marine Le Pen.

Investors were once again spooked by soaring inflation, weakening global growth, and the potential for more aggressive monetary policy from the US Federal Reserve.

‘Super-hot inflation is settling like an ominous cloud over the world’s largest economy, and although a succession of steeper interest rate hikes might blast cold air onto demand, the worry is that the policy could blow up into a recession, which would have knock-on effects around the world,’ said Susannah Streeter, senior investment analyst at Hargreaves Lansdown.

There was also concern about the situation in China and the government’s refusal to budge on its zero-tolerance policy towards Covid-19. Restrictions have been announced in Beijing, which has suffered a fresh outbreak of the virus, sparking fears about employment and economic growth, as well as creating more supply chain disruptions. 

Expectations of reduced oil demand from China as well as a slowing US economy sent Brent crude falling 3.7% to $102 a barrel. Oil and commodity stocks were sharply down this morning, including:

• Anglo American (AAL) down 6%, or 207p, at £32.50;
• Rio Tinto (RIO) falling 4.8%, or 274p, at £53.90;
• BP (BP) off 4.3%, or 17p, at 376p;
• Antofagasta (ANTO) weakening 4.1%, or 62p, at £14.31;
• and Shell (SHEL) slipping 4.2%, or 93p, at £20.96. 

Trusts tumble

The FTSE 250 fared just as badly as its large-cap peer, shedding 1.6%, or 343 points, to hit 20,538. With commodity and mining stocks sliding, Blackrock World Mining (BRWM ) investment trust was the biggest mid-cap faller, down 6.1%, or 44p, at 677p. 

Other investment trust fallers included FTSE giants Scottish Mortgage (SMT ), which fell 3.6% to 875p towards its early March post-Ukraine invasion lows, and private equity fund manager 3i Group (III ) 1,308.50 3.36% -45.50.

Private equity trusts were generally weaker. Chrysalis Investments (CHRY ), which is exposed to early-stage growth companies, shed 5.2% to reach 163p. Augmentum Fintech (AUGM ), which also invests in unquoted growth companies, dropped 3.8% to 134p. HarbourVest Global Private Equity (HVPE ) shed 2.2% to £24.98 on a 30% discount after posting a 5.5% return in March.

China funds tumbled with JPMorgan China Growth & Income (JCGI ) off 6% at 311.5p and Fidelity China Special Situations (FCSS ) down 4% at 228p as investors worried about Covid-19 outbreaks and a slowing economy.

UK smaller companies trusts retreated with BlackRock Smaller Companies (BRSC ) down 4.6% at £15.44 and Invesco Perpetual UK Smaller Companies (IPU ) off 3.6% at 509p.

Defensive multi-asset trusts showed their mettle. Ruffer Investment Company (RICA ) and Personal Assets (PNL ) firmed 0.5% to 315p and 0.1% to £497 respectively while Capital Gearing (CGT ) eased 0.2% to £51.20 and BH Macro (BHMG ) currency and bond hedge fund was unchanged at £42.50.